FOOTBALL & REAL ESTATE INVESTING

I get asked questions from new and aspiring investors all the time. All too often, they go something like this: What’s the best thing to invest in? I have $xx,xxx, how should I start?

Hey, I’m flattered. I’m flattered that you have seen what I’ve done and want to replicate it. I want you to be a successful investor and want to help where I can. But those questions aren’t going to get you there.

WHAT’S THE BEST PLAY IN FOOTBALL?

Think about it like this; would you ask Bill Belichick (five-time Super Bowl champ coach) “I want to be good at football. What’s the best play to run?”

That is an absurd question! There is no single best play in football. Are you on offense or defense? What down is it? How many yards to go? Where are you at on the field? How much time is left in the game? How many time outs do you have? Are you ahead or behind? What are your team’s strengths? What are your weaknesses? Who are the strongest players on the field? Who are you playing? What are their strengths and weaknesses? How do you match up with them?

Every situation is different. What is right in one instant, for one team, in one set of conditions could be a completely wrong play for another team with a completely different matchup.

But when it comes to real estate investing, wannabe investors often ask the equivalent of “What’s the best play?” They want someone to tell them exactly what to do and when to do it. It just doesn’t work like that. What is right for one investor, in one set of conditions, could completely wrong for another investor.

THE “OBVIOUS” PLAYS

There are times in football that the right play is super obvious… but even the obvious plays are not as straightforward as they may seem.

For example; it’s 4th & 15, you have the ball 70 yards from the end zone in the first quarter. What’s the best play? Well, clearly you punt. Super straightforward. Easy-peasy right? Well, not really…

How deep can your punter kick? How good is their returner? Their blockers? Your coverage? Sometimes the right decision is to angle the punt to the sideline and not give them a chance of a return. Under different circumstances, the best play is to kick it as deep as possible to pin the other team back. Even something as obvious as “you punt the ball” is more nuanced than it seems on the surface.

Compound that with the fact that even when you put all the variables together, nearly every situation has multiple plays that are reasonable calls to make. Say it’s the very beginning of the game, you received the opening kickoff and it’s 1st & 10 at the 25. What’s the right play to run?

It’s the same thing in real estate. There is a lot of nuance to every specific situation. Even something that seems to be an obvious investment “play” isn’t as straightforward as it seems. And there are often multiple investment plays that could all be “right”. The right answer depends on such a multitude of variables and circumstances that unique to each individual at that point in time…

What are your specific goals? How much do you have saved to invest? How much can you save monthly? What’s your credit score? Where do you live? What does that market offer? How strong is the market at that time? How demanding is your day job? Do you like your day job or do you want to leave it as soon as possible? What are your strengths? What are your weaknesses? Are you going to self-manage? Are you a handy person? What’s your risk tolerance?

SUCCESSFUL COACHES AND INVESTORS

High level, winning coaches don’t achieve success by just learning a few great plays – no matter how thick their playbook. Great coaches understand how all the variables work together and, in an instant, analyze them all to make the right call. They learn the theory and mechanics of the game. They dig in to understand all the variables at play and why they should run a particular play at a particular time. Winning coaches know when a certain play is the right play and when it’s the wrong play based on all the variables of their unique current conditions.

If you want to achieve a high level of success as an investor you must spend the time to learn the concepts and theories. You need to understand WHY a certain strategy or investment may or may not be the right thing for you given your current situation. Trying to run every play in the exact same way, and in the exact same order another successful investor did them in is not how you will become a successful real estate investor.

I wasn’t this successful in real estate by running someone else’s playbook. My success came because I spent time to learn the WHY behind everything. I knew why the decisions and investments I made were right for me at the current time given all the variables at play at that time. But your individual circumstances are going to completely different than mine.

THE TRAINED MIND

Instead of asking me “Should I flip properties or buy rentals?” Study the pros and cons of flips versus rentals. Determine the pros and cons. See how it fits in to your life, your goals, your circumstances, your market, the current economics, etc. Study what makes a “good” flip and a “good” rental return. Assess properties in your chosen market to see if either has potential. Maybe the right decision is flips, maybe it’s rentals, or maybe it’s both.

Instead of asking me “Should I partner with someone? Where should I start looking? What percentage should I use for this expense? When exactly did you do <fill in random milestone here> in your career? When should I do…? What should I…?” ask yourself WHY for everything. Study and understand the concepts and theories. Understand the pros and cons. Seek an understanding of the concepts and theories. Dig in to understand all the variables at play and why you should run a particular play at a particular time.

Well said! I was just explaining this to someone today, in different words, like you explained it with the football scenario. I like the way you explained it better than I did lol. Tough to get the words out straight when explaining this to people who are looking for a straight one way answer. I’m still pretty new at real estate investing compared to most but after learning the basics and starting to roll with deals you start seeing this picture you explained above and how there are so many variables to each person investing in real estate. Goals, current income, your market, what kind of current or future lifestyle you want to live, your debt and monthly expenses etc etc etc. It just takes time to see a big picture of investing in real estate and the different ways to reach your goals with your investments. Learn the basics first, take action and do some deals and always search for more knowledge and network network network and if you got your head on straight you can turn into the NFL Super Bowl champion coach.

@Mike Flora & @Steve DellaPelle - glad you guys like it! I had been trying to stress to people the importance of asking and knowing why behind everything as opposed to just just wanting someone to tell them the answer. From expense ratios to general investing strategies and everything in between. I just came up with the analogy recently to help drive it home and for people to (hopefully) understand the importance.

@Austin Fruechting One of my friends who is a great golfer first taught me that everything is meaningless unless you set a target for yourself. If you don't know where you're aiming then you'll never get where you want to be....I found this to be true not only with golf but also with investing and a bunch of other aspects of life.

Set your target first and then fill in the blanks. The why's will become much easier after this.

That being said, I always have the same answer when it comes to that question. To me, the best thing to invest in is buy and hold real estate. Flipping is just creating a job. The house stops making you money as soon as you sell it. But buy and hold generates wealth - thru rental income, principal paydown, and appreciation.

Whether its commercial or residential really doesn't matter - just as long as its buy and hold.

@Austin Fruechting One of my friends who is a great golfer first taught me that everything is meaningless unless you set a target for yourself. If you don't know where you're aiming then you'll never get where you want to be....I found this to be true not only with golf but also with investing and a bunch of other aspects of life.

Set your target first and then fill in the blanks. The why's will become much easier after this.

Absolutely! That's the first WHY. You have to start at the end.

“Would you tell me, please, which way I ought to go from here?”“That depends a good deal on where you want to get to,” said the Cat.“I don’t much care where–” said Alice.“Then it doesn’t matter which way you go,” said the Cat.

-Lewis Carroll from Alice in Wonderland

or here's another good along those lines:

If one does not know to which port one is sailing, no wind is favorable. - Seneca

Yep, what are your goals and what is your vision. Then start to craft a plan around your strengths and those you can leverage that will help you achieve your vision. Don't get sucked in by that shiny object!

That being said, I always have the same answer when it comes to that question. To me, the best thing to invest in is buy and hold real estate. Flipping is just creating a job. The house stops making you money as soon as you sell it. But buy and hold generates wealth - thru rental income, principal paydown, and appreciation.

Whether its commercial or residential really doesn't matter - just as long as its buy and hold.

So "buy and hold" is your version of the "obvious play"... but even then there are so many variables to consider that it becomes not so obvious. Residential or commercial? What market? What size? Value add or turnkey? What expense ratios for analyzing?... and we haven't touched on their personal variables and circumstances...

As to flipping houses; maybe the answer for some people is to flip. Maybe part time in order to generate additional capital to invest in buy and hold. Maybe full time so they can make their living doing something they enjoy more than their other job and still invest in buy and hold for the long term.

.

(btw; I know you're experienced enough to understand that, just using this to further illustrate the analogy for other readers)

I guess my point would be is that when people come to me with a general question like that, then I would give them a general answer. And to me, my response to anyone would be buy and hold. If they want more detail, then they need to ask the right questions to get there.

I actually have helped several people get into investing and had to nudge/push almost every one to do their first deal.

But my job isn't to ask and answer all their questions. I'll tell em buy and hold and leave it at that. Thats what I know. Thats whats worked for me. So thats what I would recommend to anyone else.

Ultimately, if its not a fit for them then they probably shouldn't be asking me what to do.

If I really believed that flipping was better, then I'd be flipping. :-)

I guess my point would be is that when people come to me with a general question like that, then I would give them a general answer. And to me, my response to anyone would be buy and hold. If they want more detail, then they need to ask the right questions to get there.

I actually have helped several people get into investing and had to nudge/push almost every one to do their first deal.

But my job isn't to ask and answer all their questions. I'll tell em buy and hold and leave it at that. Thats what I know. Thats whats worked for me. So thats what I would recommend to anyone else.

Ultimately, if its not a fit for them then they probably shouldn't be asking me what to do.

If I really believed that flipping was better, then I'd be flipping. :-)

Interesting your profile says you are "thinking about flipping and maybe new construction." But that's neither here nor there. Just because it's not the right long term answer for you, and might not be the right short term answer for you either, especially with 60+ rental houses (well done by the way!!!), it doesn't mean it's not the right thing to do for someone else. IF they understand the pros and cons, the why they should and shouldn't, etc.

The whole point is to understand why. Yes flipping vs buy and hold was one question I put there that apparently you zeroed in on possibly because you were recently kicking the idea around. But that was just to illustrate the point. The next paragraph gets into just a handful of other questions I see. People are looking for hand holding at all points, without trying to know why. That's how you end up seeing people trying to use the same expense ratios for a $500 a month rental and a $3000 a month rental. Or whatever it may be.

@Austin Fruechting : If you ask Bill Belichick what's the best play, so long as he's off-record, I'm sure he'd reply "Whichever one was developed through my use of spies and other cheat methods" :D

LOL JD! That's actually has a point though.

Although not quite spies and cheat methods... In negotiations, if you can gain inside information of the opposition it can put you in a great tactical advantage... assuming you've studied negotiations enough to know how to exploit it.

That was the biggest reason of how I was able to get a package deal closed at $790,000 that appraised as is at $1,265,000. And the deal before that at $1,062,000 that appraised at $1,390,000. And two big packages from the same seller last year for $2,579,000 that appraised for $3,286,400... getting those were all about gaining some inside information and then knowing ways to exploit it.

@Austin Fruechting dude, best post I've seen in a while. and I don't even like or understand football. I'm already where I planned to be and now am considering where I want to go. thanx for helping me dig in to this. obliquely

"What’s the best thing to invest in? I have $xx,xxx, how should I start?"

The answer to that question is to start by investing in yourself...with books, podcasts, and analyzing deals. Set up a daily process (10 pages, 1 podcast, 1 deal, etc.) and that will lead to answers.....and then set up a new daily process for the next progressive question. Daily habits done over extended periods of time lead to answers, results, and success.

The other answer is to stick it in the stock market or come back with a better question.

"What’s the best thing to invest in? I have $xx,xxx, how should I start?"

The answer to that question is to start by investing in yourself...with books, podcasts, and analyzing deals. Set up a daily process (10 pages, 1 podcast, 1 deal, etc.) and that will lead to answers.....and then set up a new daily process for the next progressive question. Daily habits done over extended periods of time lead to answers, results, and success.

The other answer is to stick it in the stock market or come back with a better question.

@Austin Fruechting this was great analogy. I think the “I have $xx,xxx, what should I invest in” question is an example of not knowing what you don’t know as a new investor. The reason why it is a difficult response and it can be tiring to experienced investors is because it is not a simple answer. People just want the simple answer to their question and they don’t realize that to truely answer the question appropriately more information is needed. I think this is why Robert Kiyosaki in several of his books responds to this question by saying “I don’t know, are you a good investor.”

Great analogy @Austin Fruechting . At least in football, the why and the goal is obvious. I get these questions a lot too, but usually about which sort of entity, holding co, etc. they should form and why.

Without some background as to debt levels, income/taxation level, asset type, investing strategy, their why etc it is similar to asking what is the best play in football for sure. In my case, the best play in football question where the coach needs a license and a CPA & law degree to be able to answer!

I'll start saying something similar to @Mike Dymski . A daily action plan of self-discovery. Good habit suggestions to figure it out. Good discussion!

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